The 2026 Allianz Risk Barometer revealed some surprising findings for construction and engineering businesses. Now in its fifteenth year, this annual business risk ranking by corporate insurer Allianz Commercial incorporates the views of 3,338 global risk management professionals on the main perils on their radar for the year.

Survey respondents included construction and engineering risk experts who identified the threats keeping them up at night. Here is how they ranked the top industry risks for 2026:

Natural Catastrophes

Natural catastrophe risk retains the top spot, with 38% of construction and engineering respondents citing this risk as their leading concern for 2026. From the insurance perspective, economic and insured losses remained high, albeit lower than the 10-year average. The evolving nature of natural catastrophes continues to pose significant challenges to businesses and the (re)insurance industry. Insured losses from natural catastrophes are set to reach $107 billion for 2025, according to Swiss Re—the sixth year in a row they have exceeded $100 billion, while economic losses are well in excess of $200 billion.

While the Gulf Coast experienced a relatively quiet hurricane season in 2025, with fewer major storms making landfall than in recent years, concerns about natural catastrophe risk remain acute. The reduced hurricane activity provided some respite to coastal communities and the insurance industry, but the broader landscape of natural disasters continued to pose significant challenges.

Notably, SCS—severe convective storm—events, including hail, damaging winds and tornadoes, saw a marked increase in frequency and severity across the central and eastern United States. These storms often result in substantial property damage, business interruption and insured losses, rivaling or even exceeding the impacts of hurricanes in certain regions.

The rise in SCS activity underscores the need for continued vigilance and adaptive risk management strategies. It is a reminder that even when one peril appears to subside, others can surge, shifting the risk profile for companies and insurers alike. Stakeholders must remain proactive in monitoring evolving weather patterns, investing in resilient infrastructure and updating catastrophe models to reflect these dynamic threats.

Climate Change

Jumping from fourth to second place for construction and engineering risk experts this year is climate change, which includes physical, operational and financial risks associated with extreme weather. 2025 marked yet another year of record global losses and growing climate risk. The year’s standout event was the California wildfires in January, which took place outside the traditional fire season and spread quickly in urban areas, incurring insured losses of $40 billion, according to Swiss Re.

Climate change is increasingly recognized as a driving force behind more frequent and severe weather events, such as SCS, wildfires and flooding. These phenomena not only pose significant challenges at the local level but also have far-reaching effects on global supply chains. In the context of the U.S., this issue has become especially relevant due to the substantial procurement of equipment required for data center and power generation projects.

For local economies, climate-related disasters strain emergency response systems and damage infrastructure, including roads, utilities and buildings. Data center and power generation projects can experience delays in construction, increases in costs and threats to operational continuity.

Extreme weather events and environmental changes abroad can affect the production and transportation of key components and materials needed for U.S. projects. For example, flooding in Southeast Asia, droughts in South America or wildfires in Australia can disrupt mining operations, manufacturing plants and logistics networks. The complexity and interconnectedness of modern supply chains mean that a single event in one part of the world can have cascading effects on project timelines and budgets in the U.S.

The U.S. is undertaking significant investments in new data centers and power generation facilities to meet the demands of a digital economy and a growing population. These projects rely heavily on a steady and reliable supply of specialized equipment, much of which is sourced from global suppliers. As climate change continues to disrupt local and international supply chains, project managers and procurement teams face heightened risks and uncertainty.

To mitigate these risks, many organizations are reevaluating their sourcing strategies, increasing inventory buffers, diversifying suppliers and investing in more resilient infrastructure. Additionally, there is a growing emphasis on sustainability and climate adaptation measures to ensure long-term viability and minimize vulnerability to future disruptions.

Fires and Explosion

Fire and explosion risk once again takes the third spot in the Risk Barometer rankings with 25% of construction companies citing it as a top concern. Few things can be more destructive for a business than a fire. Not only can it cause costly damage, but a fire can also interrupt a firm’s operations indefinitely. Fire remains a significant cause of business interruption and supply-chain disruption, especially where critical components or equipment are concentrated geographically or are among a small number of suppliers.

Allianz Commercial analysis of more than 1,000 business interruption insurance industry claims over a five-year period ending in 2023 (with a value in excess of US$1.3 billion), shows fire is the most frequent driver of these claims and accounts for over a third of the entire value (36%). The degree of disruption can be very high, as it can take longer to recover from than many other perils, and the impact on suppliers can often be great.

Fire has also become an elevated risk with electrification and the growing prevalence of lithium-ion batteries. Inadequate handling, storage or transportation of these batteries has been linked to an increasing number of fire incidents on land and at sea in recent years. Regularly assessing and updating prudent fire mitigation practices, including preventive measures, fire extinguishing methods and contingency planning remain essential for all businesses to lower the risk of loss from any incident.

Modern data centers are integrating batteries at unprecedented rates, primarily for backup power and energy storage in uninterruptible power supply systems. The widespread adoption of lithium-ion batteries, in particular, has raised the risk of thermal runaway events, which can quickly escalate into fires. The compact nature and high energy density of these batteries mean that even a minor defect or malfunction can lead to rapid ignition and propagation of fire throughout a facility.

As global demand for cloud computing, artificial intelligence and big data analytics continues to surge, data centers are scaling up both the number and density of servers. High server utilization leads to increased heat generation, placing greater stress on cooling systems and electrical infrastructure. Overloaded circuits, equipment malfunctions and overheating components can all serve as ignition sources, further amplifying the risk of fire incidents within these critical facilities.

To meet the substantial energy demands of data centers, power plants are increasingly deploying gas turbines as a reliable and flexible source of electricity. However, gas turbines operate at high temperatures and pressures and utilize flammable fuels, making them inherently susceptible to fire and explosion hazards. Leaks, equipment failures or operational errors can result in catastrophic incidents, affecting not only the power plant but also the data centers they support.

Given these converging factors, fire and explosion risk management remains a top priority for construction and engineering professionals. Comprehensive fire detection and suppression systems, rigorous maintenance protocols, regular safety audits and advanced monitoring technologies are essential strategies in mitigating these risks. Collaborative efforts between engineers, facility managers and safety experts are critical to ensuring operational continuity and the protection of assets, personnel and the environment.

To read the full report, please visit: 2026 Allianz Risk Barometer

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